3 Types of Life Insurance You Need to Know About
3 Types of Life Insurance You Need to Know About
You may already know about life insurance, with the most common type paying out a lump sum if one dies within a specified term.
There are several different types of life insurance, and with an average funeral costing an estimated £3,953, here are three types you need to know about.
Death in service insurance
This is a type of insurance that some businesses offer their employees as a benefit.
A Forbes Advisor survey revealed that of the 35% of the UK population with life cover, only 27% of that share has cover provided by their employer.
Forbes say that typically the pay-out is four times an employee’s annual gross salary, and that senior staff are more likely to receive more generous amounts.
One notable aspect of this type of cover is that it ends if an employee leaves the company. If you’re employed with death in service insurance, but then lose your job or switch employers, you’re no longer protected.
Like many other types of insurance, any pay-out is intended for the employee’s family or other chosen beneficiaries. This pay-out is exempt from inheritance tax.
Sometimes death in service plans are only available when you’re signed up to a pension scheme.
Directors life insurance
As a business owner, you have to deal with the stress of being responsible for the insurance of your company’s directors. There are various policies which allow business owners to protect to offer a more robust, more reassuring protective framework to key members of staff.
Policies like directors life insurance can be paid for through the business, meaning you won’t have to pay for the insurance personally.
Directors life insurance can result in a significant saving compared to buying personal life insurance, given that directors won’t be paying for the cover out of their post-tax income. The company claims the cost against its corporation tax bill.
This type of cover is suitable for companies including those who wish to provide insurance to specific individuals, employees below the age of 75, and those wishing to provide higher earners with insurance on top of their pensions.
Over-50s life insurance
Designed for those aged between 50 and 80 or 85, an over-50s cover is lower cost, and everyone in this age bracket is automatically accepted. This means that you don’t need to answer any health questions or get a medical check before the cover can start.
Forbes point out that while premiums are fixed, if you live a long time, it’s possible that you’ll pay more into the plan than what your family end up receiving.
Money Helper provides the example of someone paying £20 per month from the age of 55, with the promise of £5,000 when they die. In this scenario, by the age of 76, they’ll have paid £5,040.
It’s for this reason that such plans may not be the best idea for everybody, with some alternatives being putting money into a savings account, leaving money in your will, or seeing if your spouse or civil partner qualifies for Bereavement Support Payments.
Image thanks to https://unsplash.com/photos/hallway-between-glass-panel-doors-yWwob8kwOCk
Adrian Lawrence FCA with over 25 years of experience as a finance leader and a Chartered Accountant, BSc graduate from Queen Mary College, University of London.
I help my clients achieve their growth and success goals by delivering value and results in areas such as Financial Modelling, Finance Raising, M&A, Due Diligence, cash flow management, and reporting. I am passionate about supporting SMEs and entrepreneurs with reliable and professional Chief Financial Officer or Finance Director services.
